By Michael Syn, executive vice president and head of derivatives, Singapore Exchange.
“Singapore Exchange’s derivatives platform celebrates its 30th anniversary this year, having its origin in SIMEX which was Asia’s first international financial futures exchange. Until SIMEX all Asian futures exchanges were only domestic commodities markets.
The importance of the offshore hard-currency market was not as obvious then. London was overtaking Paris as Europe’s financial hub, due to the growing pool of petrodollars which developed into an offshore Eurodollar market for USD funds. The Eurodollar interest rate future was therefore the first contract that SIMEX launched, with great success.
Since that time, SGX has remained focused on buy-side risk management needs in the offshore hard-currency markets. In the Asian context, the most important and developed asset class has been equities, so SIMEX invented Japanese, Taiwanese and Chinese equity futures contracts, with each respective domestic futures exchanges following suit after the international marketplace was pioneered.
Today, European institutional investors are key clients for SGX equity and currency futures. The timezone overlap between late-Asia and early-Europe allows our Asian equity futures to continue trading after the domestic stock markets have closed. For example, China closes at 3pm (Singapore time), Hong Kong closes at 4pm, but SGX China A50 futures continue trading until 2am.
There is a strong historical affiliation with European investment managers, who have a long performance track record in pioneering investment access for Japan, Taiwan, China, India and South-East Asia. All these equity and currency markets are uniquely offered as hard-currency futures on SGX.
It was therefore necessary for SGX to secure the necessary regulatory passports for our institutional-grade European clients. EMIR/MIFID recognition is well underway, with ESMA having recognised Singapore as an equivalent jurisdiction. We believe that high regulatory and risk-management standards will continue to be a strong driver of buy-side participation in Asian capital markets using SGX.”